Premium

• The premium is the amount of money a person pays an insurer to receive healthcare coverage. In most cases the premium is set annually, though paid in monthly or quarterly installments. Once a premium is set for the year, it is a fixed payment regardless of the medical treatment the customer receives. The initial premium is an individual amount based on a range of factors including age, gender, occupation and whether a person smokes.
  
  Insurers can raise premiums every year. However, effective September 2011, an insurer must publish an explanation for any annual rise of more than 10 percent. This is a new regulation issued on May 19, 2011, by the Department of Health and Human Services (HHS) under the authority of the Affordable Healthcare Act.
  
  

Deductible

• The deductible is the amount of money a person must pay towards claims during the year. Unlike most forms of insurance, a medical deductible is an annual limit rather than a per-claim limit. For example, if a person has a deductible of $600 for the year and had two treatments costing $500 each, she would pay the full $500 for the first treatment and $100 toward the second treatment, with the insurer paying the remaining $400. Higher deductibles usually result in lower premiums.
  
  

Copayment

• A copayment is a fixed contribution the person makes for each particular health event. The most common examples are visits to a primary care physician or receiving a prescription drug. The copayment is the same regardless of the actual costs of the event. Generally, copayments are not counted towards an annual deductible.
  
  

Coinsurance

• Coinsurance is another option that lowers premiums. The coinsurance means that once the deductible limit is reached, further treatment costs are split between the customer and the insurer by an agreed percentage. For example, a person might have an annual deductible of $600 and a copayment of 25 percent. If this person had two sets of treatments each costing $500, he would pay the full cost of the first treatment. For the second treatment he would pay the remaining $100 of the deductible and 25 percent of the remaining costs. This means the customer pays a total of $200 for the second treatment and the insurer pays $300.
  
  

Out-of-Pocket Maximum

• Some policies include an out-of-pocket maximum. This is the total amount a person must pay above and beyond the premium or the combined spending on deductibles, copayments and coinsurance.